Jim Kopas

 On June 23^rd the 50 Day Moving Average for the S&P 500 crossed above the 200 Day Moving Average for the first time since December 2007.  On Friday, September 4^th, the 50 Day M.A. was 10% above the 200 Day M.A. for the first time since April 20^th 1999.  This is just the 19^th time that the 50 Day M.A. has surpassed the 200 Day M.A. by 10% since 1954, and is another promising sign for a continued market recovery.

Historically, the S&P 500 was higher (on average) 1 month, 3 months, 6 months and 1 year later when the 50 Day M.A. crosses 10% above the 200 Day M.A.  In fact, the S&P 500 was higher one year later in 14 out of the 18 occurrences (roughly 78% of the time), with an average gain of 12.32%.

Courtesy of Dorsey Wright and Associates

I decided to cross reference the results of the Moving Average Performance to one of  Pring Turner Capital Group’s  stock timing models (See Last Weeks Post), to see how the market responded when the 50 Day M.A. crossed 10% above the 200 Day M.A. and the timing model was issuing a buy signal (similar to current market conditions).  The results were impressive, as the S&P 500 was higher one year later in 11 out of the 12 occurrences (more then 91% of the time), with an average gain of 15.69%.

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Jim Kopas Investments